[14] Startup Growth Done Right

Ralph Lueng.jpg

Ralph is a proven senior executive with 20 years of diverse blue-chip leadership experience across strategic finance, corporate strategy, and operations at companies ranging from early-stage startups to Fortune 100 companies globally. Over the past 7 years, he has also advised extensively high growth technology companies, helping them navigate through early-stage strategic and operational growth.

Currently as the Chief Financial Officer at Jyve?”

Throughout his career, he has strategically built companies, teams, and partnerships that sustain strong growth. He has also successfully helped companies scale, transform, and exit; completing 80+ strategic transactions and exits for $90+ billion of M&A value and raised $60+ billion of equity/debt capital.

Ep 14 SVS transcribe

 

Shawn Flynn  0:00 

Welcome to Silicon Valley successes. On today's episode, we have Ralph Liang, who is a former investment banker at Morgan Stanley, who has since gone on to create his own company at age ships. It's a company that helps startups grow. So let's learn a little bit about him.

 

Show Announcer  0:23 

Welcome to Silicon Valley successes, we interview experts and entrepreneurs to give the world access to the knowledge and experience that is here in Silicon Valley. Our mission is to create opportunities for those who seek them and tell you to become the next Silicon Valley success

 

Shawn Flynn  0:44 

Rao. Thank you for coming on Silicon Valley success. And thanks for having me. Can you give a brief introduction of yourself who you are what you're up to?

 

Ralph Leung  0:52 

Sure. So as you mentioned earlier, I found that Ada ships but a year and a half ago at chips is a growth and innovation platform focused on helping corporations find innovation and startups helping them grow and scale. Prior to that it's been almost 20 years honing my career in a variety of strategic roles. Everything from being an investment banker in New York, and in Hong Kong, helping tech companies and FinTech companies from being a principal investor, Principal m&a person, as well as being a strategy consultant.

 

Shawn Flynn  1:20 

Wow. So tell me about how that 20 years of experience kind of leads into Ada chips. How did that help you with what you're doing now? Right.

 

Ralph Leung  1:28 

Well, that's, that's a good question that's at that was the real foundation of how I founded the company, as ships know, when I took a step back and look back into my career and thought, what have I learned over this, this 20 year path, right? I've worked with amazing leaders from enormous companies like Alibaba to work with earlier stage startups, all throughout Asia Pacific, and even in the US. And I learned a significant amount of seeing companies make mistakes, seeing companies grow. And then scale seeing companies go from being an early stage startups to a growth equity company to become a public company.

 

Shawn Flynn  2:01 

Okay, some of that lingo that you're saying right there, some of the audience at home may not know it was growth equity, short, and all that.

 

Ralph Leung  2:07 

So early stage startups which which I understand a lot of your people on the show talk about is

 

slightly later than two guys talking an idea or you actually have a product, you have an early stage business, but you're finding that early traction, early business growth equity is primarily in the phase right after that you've raised a few rounds of capital are raising money. So we can focus on scaling the business, right, not to prove a concept to prove whether it works or not. And then right after that, you know, some people some companies tend to go public, right, if they choose to go public listed on NYSE or NASDAQ, for example, they become publicly traded corporations

 

Shawn Flynn  2:44 

interested. So when do you step in and start working with those companies?

 

Ralph Leung  2:48 

On the leadership side? Yes. So at chips will typically step in the earlier stage of the business. What will work with people with technically, oftentimes, technical founders, okay, have a product, they have some early revenue, they have proven that there was a market fit for this, or they don't have a business built around it. So

 

Shawn Flynn  3:09 

an accelerator is that still too early for you? Or is that the right time?

 

Ralph Leung  3:12 

That's typically the right time, right? So they've gone through either an incubator program and accelerator program, they have something built, but they don't really have a team to focus on the business, they don't have the capital to hire a bunch of C level executives around them to build a business. So he would come in and we help build that real business for them. Okay, tell me more about how you help help them build that business. Sure. Okay. So when you when you take a step back, right, peel the onion on what makes a business successful. Okay, you have to start with a product, you have the core product, and that's what they ideally should spend time focusing on building and making sure there's product market fit, whether it's by themselves through an incubator and accelerator program, okay, but around the round the product you have to think of how do you go to market? So how do you sell this? How do you sell the product? How do you take it to market what really is your market,

 

Shawn Flynn  4:01 

this isn't necessarily just a physical product, right?

 

Ralph Leung  4:04 

software, it could be software could be, you know, something you see on Shark Tank, it could be, you know, it could be anything, but something that somebody would pay money for cable service doesn't matter, then you think about how you go to market, how do you sell it? How do you build your core competencies around the functional areas around it. So any good business beyond the product and selling you have to think finance, you have to think accounting marketing, you think branding, you think advertising, you think legal, right? You think HR and recruiting talent, and infrastructure and operations, all of these elements that that really formed around the product, that's what he focuses on. Now, every company is a little bit different. Some companies may, depending on the founder of the founding team, they may have certain expertise on certain areas. So we usually spend time studying the company working with the founding team, understanding where the biggest gaps are, when come in to help them out in the areas

 

Shawn Flynn  4:55 

now, now, everything you just mentioned there, you can't do that alone. Obviously. Tell me about your team.

 

Ralph Leung  5:01 

Sure. So we, we what, let's take a step back. Right. There are plenty of great players in the market, especially in Silicon Valley that help startups right, yeah, look at the list of incubators, accelerators, just one every four blocks. So there are definitely a lot of players in the market, the way that we want to differentiate ourselves is taken, taken execution approach to helping startups grow. So not an education approach, which is typically the approaches that accelerators incubators to that they follow. Because they weren't big batches, Oh, we don't run big batches. And we go bespoke one on one a companies a year maximum on the startup side, we take a very hands on execution based approach to helping them scale.

 

Shawn Flynn  5:42 

Okay, so tell me about when you meet one of the stars for the first time, what does that look like, you just sit down with the founder and go, Hey, I saw your product and you're not doing anything with it. I think we can make you guys something or is it they come to you, like, hey, we've tried all these things, we don't know what we're doing.

 

Ralph Leung  6:00 

It's a combination of both right. And, and there's three elements. So we we haven't done any advertising and marketing, everything's through referral. Okay, so usually comes through some of that we, as a friend of yours, a friend of a friend, someone that we worked with, in the past, they come through a referral channels, you know, they say, hey, so and so has a has company, you know, he or she started a company, they have a great product just came out of whatever accelerator program,

 

they're thinking about doing a series A or Series B fundraising, or they're really struggling trying to get in front of a large corporation to try to sell that big enterprise deal, right? Then, when we sit down first meetings like this, this just one on one get to know each other? Well, first, we have to see we get along, okay. Because if, if you don't like me, and I don't like you. So yeah, this is not working out at

 

Shawn Flynn  6:43 

three take that

 

Ralph Leung  6:45 

you know, but it's do is the understand each other, okay, just to see, we get a law giving you a chance to understand what it is that you're struggling with what you are trying to accomplish, right. And then after this first meeting, then we have a second meeting, what typically they do is they start up with send us information, right?

 

Shawn Flynn  7:01 

So this is typical, what type of information is your market information?

 

Ralph Leung  7:04 

Or no, we just be your typical diligence pack, right. So, again, what will diligence pack for companies that we have that haven't gone through a certain stage yet, I don't expect them to have a lot, but I do expect them to have at least some semblance of a business plan. Okay, not necessarily the traditional 50 page Word document business plan that people very familiar with, it could be a set of slides that they've used to capture note.

 

Shawn Flynn  7:26 

So like a 15 Deck slide, that would be enough for you to

 

Ralph Leung  7:31 

give me something, something to show that you've thought about your business, I thought about your product, thought about your roadmap, right? Doesn't have to be fully baked, does not be fully developed, that's what we would help you with, okay, but give me something where I can go home, study your business with my team, my understanding where your challenges are, give us a chance to assess where what we think about your business, right, because we approached it just like we're investors, really, because we only, we only spend time with a company's maximum, you know, same way that a VC would have X amount of capital them to invest in premium content. So you have to be very picky about who you want to work with. And this is a long term partnership. It's not, we're not consultants, right? We don't come in, do a three month McKinsey style project, and then we take off, but you never see us again, that's not how we operate. So we operate as it were partners together, which means we're in it for the long term, which also means we have to get along well, we have to really believe in the business believe in the founding team

 

Shawn Flynn  8:23 

interested. So let's go back Say, say you've met that startup, you get along with them, you want to help with them, the first thing they say to you is we don't have money or we're trying to raise money right now, what information does a startup founder need to know about raising capital?

 

Ralph Leung  8:41 

That's That's a really good question. And I think there's, there's a lot of confusion in the market, depending on the stage, right, just based on the stages that we talked about before, I think with with technology these days, a lot of people can look up Cora, they can go to Google and just just look up, what do you need in the fundraise deck? Right? What do you need in a picture tech and they follow certain guidelines. Now, my advice to founders that are going through this process is take a step back first, understand, fundraising is not a one shot deal. It's an ongoing effort. As you continue to grow the company and your your goal is not to raise money, right? Your goal is not to raised to send me get my a round, let me get my seed round, your goal is to build a business? And also what do you have to do to build a business successfully over time? I think that's the first step that any founder needs to think through before they think, Okay, how do we raise money, I get that there's pressure, if founder doesn't, you know, they have three months of runway left, six months runway left, does that mean amount of money to keep your lights on for the next

 

Shawn Flynn  9:42 

X number of mine? Okay, so they only have three months of runway, right? They even have time to respond in there.

 

Ralph Leung  9:47 

Well, that's the first mistake, I would have pointed them out, right? If you only have three months of runway, that means you started planning a little bit too late, but you always have to start thinking about it from day one, as you're thinking about building a product, you'll think about how do you have your sources of capital for how long and it's an ongoing process, right, always think about is an ongoing, long term process.

 

Shawn Flynn  10:06 

So how much of your work with the the startups is actually just sitting there and saying, this is your next one year roadmap? Let's break it down step by step, right?

 

Ralph Leung  10:14 

It's it's a large portion of what we do, we help them think very strategically about how to build a company, right? We try to get them away from short term, you know, let us sell X number of products get 10,000 users raise $5 million, right? These are very short term goals, we help them think about what is a three year roadmap and then you back into right if for us to be this when we grow up in three years? Okay, in two years, here's what we want to do in one year, this would be what we want to do. And how do you back into what do we have to do today to set us up to we can get you the three year mark? Not the six month

 

Shawn Flynn  10:50 

mark. Okay. So a lot of it is goal setting.

 

Ralph Leung  10:53 

Oh, yeah. It's think thinking about what the goals are. But also, what is the execution roadmap, like, how do we actually accomplish what our goals are, rather than just saying, you know, what, in three years, I want to be number top three in the market? Yeah, you know, that's, that's not a goal.

 

Shawn Flynn  11:07 

If someone came to you with this dream, hey, I have a three year plan. And, and as you're talking to a person, their three year plan is just that goal at the end,

 

and working step by step backwards. There's just, you know, so much information there is not there. What happens in a situation like that.

 

Ralph Leung  11:25 

So I mentioned earlier, our typical vetting process, right, we don't take applications, but we have a 2.5 meeting process. tomorrow's meeting is what we talked about is the let's just get along, right? It's just understand each other, what our priorities are, what our values are, what drives us, okay, second meeting is we have a follow up with deep dive into the business based on what you send me Okay, we look at your pitch deck we look at whatever materials that you have, we look at your XL models, right? So we understand your finances and we understand your roadmap. Okay, if that's the worst and then the last point five a meeting you know, we discuss what are working arrangement under scope of work is gonna look like to answer your question though, what happens if someone or founding team says we have a very ambitious goal in three years, we have no idea how to get there.

 

Typically, we would, we would get a good sense of that during the first meeting. Okay. And if it's that far away, then we think that's company like that may be a little too early for us. Okay? Because we typically work with companies that have done enough, enough of the legwork enough of the struggles to really understand building companies not easy You can't just you know, outsource a hired gun to come and do it for you, you have to go through the struggles yourself. But at the same time, we also understand that you don't have to do it all by yourself. So once you've done enough to get the product into the market, get some early revenue early users are the pilots you know and you're free to accomplish that chances are you would have thought through what your roadmap is going to look like even at a high level then we come in and actually stress test that model for you. So how important is it for the founder to be coachable in in this situation, it's extremely, extremely important, right? Because if you're not coachable, then why have us with you anyway, right, then we just become a hired gun to simply you want to work with the team. But this is it's the same thing as the way that a VC would think about it, right? When I invest money into a company where the founder of the founding team would not listen to any of the advice or they just looking for a check. And you know, and and some VCs may may may be okay with that, but I'd say most of them would prefer to have work with founders who are coachable because building businesses are hard, right? No one really knows all the answers. So you have to work with the team,

 

Shawn Flynn  13:26 

how important is it for the CEO to have kind of a financial background? I your backgrounds from investment bank? Yes, go a little bit more detail about that aspect of it, just the financial model and how important it is for founder where they could maybe develop this area, just basically to have a conversation with investors? Because I guess, and if they don't know, the cap table, or kind of the structure? Yeah, that meeting might be lost?

 

Ralph Leung  13:52 

Oh, it's it? That's a good question. That's so I'd say most of the founders that we work with, don't come from finance, or don't come from finance, or not former accountants or investment bankers, or anyone in that world. They're typically product folks, right? They Okay, you the engineer, so the product managers, they know the product, right? Because they have an idea, they have an idea, they want to come with something. So they have the product to answer a question, I would say it's, it's not critical, it's helpful. It's helpful, because, like you said, right, when you're it's typically the CEO, the founders who pitch because the investors want to hear from the CEO, they want to hear from the founders, they want to, they want to feel confident that the CEO, the founding team, has an appreciation for finance, for cash flow for working capital, because the number one reason why talk about working capital, what is it working capital is how much money you got coming in, and how much money you got going out on a net basis, are you working capital positive, which means you're collecting more than you are spending, which gives you more runway or vice versa, you're spending a lot more than you're collecting, which means your time is going to run out soon, right? So any founder has to have a basic appreciation of managing cash. Interesting, right? So you don't have to be finance PhD to, to be a good founder, but you have to have an appreciation for the importance of managing your money.

 

Shawn Flynn  15:10 

How important is it that the CEO has that, that respect, I guess for for money, and versus a CFO say there's a team of four CEO, CFO, CTO, sales guy? I don't know. Yeah, CFO, CEO, that that kind of relationship right there, right. Okay, so

 

Ralph Leung  15:31 

let's unpack that question. Oh, yeah. Right. For typical startup, at an early stage, you're not going to have for sea level titles.

 

Shawn Flynn  15:38 

Oh, four guys have named themselves right level titles, right. So

 

Ralph Leung  15:42 

if it's nice team, though, if it's a nice team, nice been the team where, you know, the CEO, the CFO and you name the other c Suite's they have complementary skill sets, that would be very helpful, but in my opinion, it's still very helpful, the CEO, right, and the person who is who is building the business to have some basic understanding of it. And again, we're not talking accounting principles are not talking revenue recognition, and, and those deep detail finance and accounting topics, you know, but in depreciation on how to manage money, because ultimately, that's who investors are going to trust.

 

Shawn Flynn  16:14 

It's interesting that you brought up the word trust, we had a guest on last week's episode, Bill, who talked about how important trust was in the wholesale cycle, right. So it's kind of interesting how that gets repeated. He brought up in business though trust factor

 

Ralph Leung  16:29 

absolute, especially for early stage companies, right. So going back to the phases that I talked about early stage companies, growth equity, when you're older, and then public, or just large corporations, when you're in the early stage, it's all about trust. And you have to believe that the founding team has the ability to execute, that they're coachable that you can trust the founding team to deliver, right, because you're early, you don't really have much more than the founding team to be able to teach, to get investors to be comfortable. When you're a more developed company, then you can actually look get business results. You look at KPIs, you could look at what the company has accomplished, and what's in the growth and pipeline, but when you're early stage

 

Shawn Flynn  17:08 

trust is critical. Interesting. And let's go back to you to your life's roadmap. Okay, I'm kind of curious about it. So you form 88 ships. Yes. What was the desire to form it? And why not stay in the investment banking world? I mean, it's Yeah, cushy area. For my understanding you I died depends on your heart attack. Yeah, exactly. Oh, my Ico Can you

 

Ralph Leung  17:30 

know copy of it? That's a good question. But why wants to take a step back and start and start eth ships? Yeah, it's the I reflected on my own career path. You know, after 20 years of thinking about where do I want to spend the next 20 years working, I actually add the most value be the most impactful to people I work with the companies I work with is it continued to do more deals which I very much enjoyed right, working with very large corporations around the world, I learned a ton from add significant value or is it to take that knowledge take that skill set and work with earlier stage companies that typically don't have access to the same caliber of help typically don't have access to the same type of advice right, someone or team who has worked with fortune 100 companies and say, hey Sean, this is this is not how you do it or have you thought about this or to put in that level of sophistication much earlier than you typically would be able to afford but to set you up for success right its name for your show

 

Shawn Flynn  18:27 

with that yeah, if you want more information on Silicon Valley successes please visit our website Silicon Valley successes. com also on Facebook, Twitter, LinkedIn but with that let's go back to Ralph and learn a little bit more so so Ralph, tell me a little bit about you know what startup some of the mistakes they make early that might cost them later well

 

Ralph Leung  18:51 

soon. So let's talk about fundraising for a quick sec. Perfect. I think oftentimes, startups think about valuation, right. And for whatever, whatever that's worth, maybe just people focused a lot on on the internet, or

 

Shawn Flynn  19:04 

even come up with their valuations

 

Ralph Leung  19:07 

depending on the stage of the company, right? You can you can, you can add, you can have a variety of metrics where you can peg it to, you know, how many users you have, how much revenue you have, what your monthly recurring revenue, you know, startups typically aren't profitable, right? So you're not able to use this your traditional valuation metrics that later stage companies would use right here, p multiples, and all these other multiples typically doesn't really work for jargon. People can look up on Google. Yeah, so you know, so, but for early stage companies, you know, it's a little bit looser, but all kind of comes down to economics, one on one, supply and demand, right, depending on how much investors Believe in your company in the future potential of your company,

 

you know, how many investors are flocking to it, you know, it's supply and demand, they could potentially drive up valuation that your company itself may not be able to defend. So to answer your question, typically I see as as a common mistake because early fans are so focused on I want to maximize my valuation right away right away. So even before they can really defend it, because going back to what I said at the beginning of the show, is fundraising is not a one shot deal. You got to think of it long term, but you have to think about fundraising in parallel to building a business long term if you overstretch on your valuation too early, what does that set you up for in your next round, potentially a down now potentially flat round or your pressure to deliver because you you a call it you got such a high value talking

 

Shawn Flynn  20:32 

about down around flat round real quick shortly. So

 

Ralph Leung  20:35 

let's say, you know, Sean, yet you have an amazing company, you did your very first round at a $10 million valuation. So investors said, You know, I want to buy 25% of your company. Yeah, at a $10 million valuation. But that's more than what you really deserve today, because you have for users, people are just investing in you, because it's Sean, right? 97 users, right? 97 users, you know, so that's, that's quite a lot of money per user, your that's, that's a very high valuation. Now, fast forward six months, you say, you go back to these investors and say, You know what, we need more money because we need to grow, they'll say shot, where have you gone with your 97 users? Well, I've gone from 97 to 100, I think, Well, okay, that's fantastic. But from evaluation perspective, you haven't really accomplished that much more. So I'm going to invest either at the same valuation and Australia flat round, while I would say, you know what shot I gave you all this money, you just kind of blew it, and you didn't really grow your user base, even generate much more out only invest, instead of a 10 million valuation, I'm going to value at 5 million. Wow. So that's it down.

 

Shawn Flynn  21:38 

So you have to give up a ton of your company then to get the same amount of

 

Ralph Leung  21:41 

money if you can even raise around because these these just red flags all over the place, which goes back to should you have taken that validation? That 10 million? Maybe, maybe not

 

Shawn Flynn  21:51 

right? What's your opinion, then of startups taken

 

raising money? Maybe too early? I mean, should they try to raise as soon as possible to early when they're about to run it? Should they wait to they're about to run out of money before accepting a tech or should they from day one beyond the road trying to raise things?

 

Ralph Leung  22:12 

I would, I would recommend the latter, right. I'm a huge fan of planning. And I and I understand when you're building a business, especially for startup things don't work out as planned, more often than not, right. But having a plan. being thoughtful, having a roadmap is super important, in my opinion.

 

And then you still piecing putting the pieces together as you go along. Right? Okay, but having some plan to go for, right, just like you're jumping off a cliff and trying to build the plane at same time. But having a plan before you jump off the cliff would be helpful, right. So as you in terms of raising money, same thing, don't wait until the last minute because people can smell you're desperate. Right?

 

Shawn Flynn  22:48 

So before we had, I think it was episode nine, we had a Groupon that talked about pivoted and the importance of pivot as a startup. Okay? How important is that? See, you have that three year plan, you've worked it out, these are the steps to get there after your water. You go, Okay, guys, we're not where we should be the markets telling us this. Yes? In your opinion, how important is it to pivot? And what happens in that situation? Do you then alter that whole three year period? I know it depends on the situation, right, case by case, right. But in that situation pivoted and your team coming in reevaluate everything. How does that go

 

Ralph Leung  23:24 

to get it depends on why you're pivoting. Okay. Right. Is it because your original strategy failed, right or something has changed? Or is it because the market dynamic has changed is because you found other opportunities that may be a better product market fit for you It depends right are you being proactive or reactive to something good or just something bad so that's that's my investment bank every answer to your question devil it really depends but the my my what I would say though, it is very important that the founding team is open minded like you mentioned earlier, they coachable right open minded coach both to consider pivot and maybe it doesn't have to be a full pivot. Maybe you can just be you know, slight turn.

 

Shawn Flynn  24:05 

Okay, so a little bit of recap on what we've talked about today. So far, we've had Ralph Leo vest and bacon background. He's not a founder of 88 ships. They have a full team that comes in and helps these companies actually plan out their goals. three year plans, step by step work with coachable founders, founders have just possibly gone out of accelerators or have some type of product market fit. We've talked about raising funds, and what kind of a mindset what they need to know a little bit of information, what they need to have prepared. overvaluation flat rounds. Down rounds. We've talked about run runway, a lot of a lot of terms that were thrown out there today. So go back in this episode, and go on our website for more information on those terms, and to review things. But with that being said, Rob, what have we missed on this conversation? What one important question Do you often get asked?

 

Ralph Leung  25:00 

So I would recommend for founders when given the opportunity to to have help, right? think really hard about receiving that help. As in Yes, it may cost you a little bit today, right? Or Yes, it may be it may come early. And you may feel like you're busy with so many things like getting the right type of help is super important to supercharge in that growth. Well, then, question

 

Shawn Flynn  25:23 

on that one. I don't even know if it's if it is the right type of help. Well,

 

Ralph Leung  25:29 

number one, as you're building company, you want to try to surround yourself with really good people. Right, that includes your advisors that is at ships, right. So that could be a plug. But as you're thinking about building a team around you, a could be immediate team. It could be your advisors could be a board members, definitely your investors, this becomes your sounding board as you're thinking about, okay, am I bringing in the right, help, this could be full time, senior hires Junior highers consultants, you know platforms like ours that would come in because these, this type of help can really supercharge the growth of the business, right. And I've seen many, many times where founders are saying, you know, we're very much interested. But we're so busy with something super myopic, super narrow, super myopic, and they're forgetting about the force.

 

Shawn Flynn  26:15 

So Ralph with that we have about a minute left. Can you talk about one how people can contact you who your ideal client is, and anything else you want people to know?

 

Ralph Leung  26:27 

Sure. My contact information is Ralph at 88 ships. So that's eight, eight sh, IPS. com companies. I typically work with all technology based, there are three sectors that I typically focus on. One is consumer tech, the others internet, which includes marketplaces, and that works. And the third is FinTech. And in terms of the stage of the business, we typically work with fairly early stage companies that have raised a little bit of money themselves. So their initial seed round a couple million dollars that have a product in the market ready, they're generating early revenue or pilot with a client that feel like they have figured out the product market fit and they say, you know what, we're ready for that next stage that's really focused on growth rather than fit. That's where we come in. And supercharge. We're out.

 

Shawn Flynn  27:11 

This was an amazing episode. There's so much information so everyone at home, please visit us at Silicon Valley successes, and we look forward to the next week's episode. We have some amazing guests and we're here to help you. We want to make sure that you become the next success.

 

Show Announcer  27:26 

Thank you. From all of us at Silicon Valley successes. We hope you found the information presented today useful and your path to success. For further information on accessing the resources in Silicon Valley. You may visit us on the web at Silicon Valley successes. com on Facebook and YouTube. Thank you. And remember, we want to help you in your journey to become the next success.

 

Transcribed by https://otter.ai